Corporate Courtship a Specter in Human Rights Reports on Ecuador

In her final few months at the State Department, Hillary Clinton blended into a wall of flag drapery in Singapore and gave a shout-out to the big corporations of America.

"We're proud to go to bat for the Boeings and Chevrons and General Motors and so many others," Clinton told her audience in the fall of 2012.

At the time, Chevron had great need of a strong batting arm on the international field. The oil giant has been found responsible for an environmental disaster in the tropical northeast of Ecuador.

Lago Agrio, the city where the $9.8 billion verdict for a group of Ecuadorean villagers came down, demonstrates ties to the oil companies just with its name, as a translation of Sour Lake, the Texas base for Texaco, which Chevron acquired over a decade ago.

The long and winding road of the Lago Agrio litigation before and since that judgment implicates fundamental notions within the law on international enforcement of foreign judgments, collateral attacks on those judgments, and the reach and power of U.S. courts. Along that path, it has been shadowed by the more obscure intrigues of politics and money.

As Chevron fought liability in U.S. and foreign arenas, the historically Republican political donor also began contributing millions of dollars to State Department projects in a Democratic administration. With Clinton at the State Department's helm, from 2009 through early 2013, a number of initiatives her agency advanced received multimillion-dollar contributions from Chevron.

For years before and after her tenure, the State Department published human rights reports that criticize the Ecuadorean justice system as susceptible to corruption. The distinguishing feature of the reports during Clinton's tenure is the advocacy in favor of Chevron through direct references to its legal fight, within the criticism of Ecuador's legal system.

Those reports then came in handy when Chevron went into federal court in New York and successfully attacked the Lago Agrio award.

In a ruling last year, U.S. District Judge Lewis Kaplan relied in part on the reports to find that the Ecuadorean judgment was obtained by "corrupt means." He also ordered, through a trust and an injunction, that any proceeds from the massive award be returned to Chevron.

This order puts a legal roadblock in front of any effort to collect on the Lago Agrio judgment.

Kaplan's 485-page decision is currently awaiting a ruling from the Second Circuit U.S. Court of Appeals. The principal issues on appeal are whether the lower court judge overreached the limits of his power, and whether international comity requires respect for the foreign court's ruling.

Going back to Clinton's tenure at the State Department, Chevron was engaged in an intense round of government lobbying during that period. As reported by the Washington Examiner, the oil company's lobbying expenditures hit a $20.8 million peak in 2009 when Clinton became secretary.

At that point, the Lago Agrio case was 6 years old, and during the remaining years of Clinton's time at the State Department, Chevron was to pour more than $13 million into State Department projects. That spending was accompanied by large gifts to the Clinton Global Initiative, a charity run by the Clinton Foundation.

Chevron defends the contributions to State Department projects as appropriate engagement on business matters, and characterizes gifts to the foundation as an effort to give back to regions where the company drills for oil.

"There is no connection between our contributions to the Clinton Global Initiative and Chevron's engagements with the U.S. State Department on appropriate business matters," a Chevron spokesman said by email.

"The Clinton Global Initiative was one of the many partnerships and programs that the company has had or maintains to advance our aim to build communities by investing in health, education and economic development in the areas where we do business," spokesman Morgan Crinklaw added.

While Crinklaw declined to comment specifically on the donations to State Department projects, Clinton herself showed no such reticence.

During a U.S.-China Business Council dinner in the summer of 2009 at Washington's Ritz-Carlton Hotel, she said, "We are delighted that a number of leading American companies such as GE and Pepsico, Chevron, Marriott, Corning, and others have signed on to be part of putting together this visionary pavilion that will showcase much of what is best about our country."

"There is, actually, a model of the pavilion somewhere around here that I urge you to take a look at." She added to laughter from the audience, "This is shameless, I know, but that's part of the job."

The U.S.A. Pavilion, which drew nearly 5 million visitors when it opened the next year, represented something of a bittersweet coup for Clinton. Federal law blocks the U.S. government from funding national pavilions, and the previous administration had barely scratched the surface of the project when Clinton took the reins, raising $60 million in private money.

But the resulting prominent display of corporate sponsorship drew criticism from visitors who were expecting a cultural message in the national shrine, and were met by a sea of corporate logos.

Shortly after the Ritz-Carlton dinner, Clinton witnessed Chevron's signing of a memorandum of understanding to continue a $56 million initiative with the U.S. Agency for International Development, USAid, that supports education, small business and other development in Angola.

She concluded her remarks in Angola's capital city of Luanda by singling out the oil company. "Let me especially thank Chevron for recognizing that it is important to give back to the countries where the natural resources come from," Clinton said.

A picture of the secretary at this event appears in Chevron's corporate responsibility report for 2009.

It was in the State Department human rights report for that same year that Chevron's legal troubles in Ecuador were first discussed. Specifically, the report highlights a contested piece of evidence in Chevron's campaign to overturn the Lago Agrio verdict.

"In August, a multinational oil company provided government authorities with clandestinely recorded videos that it alleged exposed a bribery scheme related to a multi-billion dollar environmental lawsuit pending against it in an Ecuadorian court," says the State Department's Country Reports on Human Rights Practices for 2009.

The videos show two men trying to goad an Ecuadorean judge to rule against Chevron in return for a kickback on an environmental contract. The New York Times later identified the videographers as a Chevron contractor and a man convicted two decades earlier for trafficking 275,000 pounds of marijuana.

Where the State Department described an "alleged ... bribery scheme," the Times reported that "no bribes were shown."

The tapes forced the Ecuadorean judge hearing the case to recuse himself, and Ecuador's government saw the tapes as a staged effort to disrupt and discredit the country's justice system.

A cache of cables from U.S. diplomats in Quito later published by Wikileaks show that one Ecuadorean official had called the footage a "disgraceful attempt to influence the outcome of the judicial proceeding."

Illustrating the far-flung and multifront nature of the litigation, the Ecuadorean government pursued the matter in federal court in San Francisco, filing a subpoena to question the cameramen and find out about the role of a U.S. private investigative agency in procuring the videotapes. A federal judge publicly issued a discovery order that included emails from one cameraman suggesting he needed payment. Chevron then successfully moved to have the order sealed.

In the second year of Clinton's State Department tenure, Chevron's donations put its name in lights both in the U.S.A Pavilion at the Shanghai Expo and in the credits for a USAid-sponsored movie about AIDS in Africa.

The State Department's human rights report for 2010 reiterates the contested bribery allegations and also discusses a criminal prosecution of Chevron's lawyers in Ecuador, who were accused of falsifying environmental remediation forms in earlier years.

In 2011, Chevron seemed to see the writing on the wall in Lago Agrio, where a new judge was presiding over the case, and the oil giant filed its New York federal court challenge to the verdict before it was even issued.

In the meantime, the money from Chevron kept flowing to State Department-backed projects. Disastrous floods in southern Thailand in 2011 had killed hundreds of people and displaced millions of people. Clinton called them the worst floods in the nation's history.

She held a joint press conference in Bangkok with Thailand's prime minister and reassured the nation that U.S. companies would continue investing in Thailand. She added, "I'm very proud that Coca-Cola is teaming up with Habitat for Humanity on reconstruction projects, and Chevron has donated $2 million toward relief and recovery."

The State Department's human rights report for 2011 again discusses the Lago Agrio litigation. "While the Constitution provides for an independent judiciary, in practice, the judiciary was susceptible to outside pressure and corruption," it says.

Kaplan's subsequent injunction against the Lago Agrio judgment quotes from that passage. "Likewise, the Human Rights Report for Ecuador recognized that the judiciary was 'susceptible to outside pressure and corruption,' particularly in cases of interest to the government," the federal judge wrote.

Since John Kerry succeeded Clinton as secretary in early 2013, Chevron's legal troubles in Ecuador have not made it into any State Department report. And despite its multimillion-dollar donations to Clinton State Department projects and hundreds of thousands of dollars given to the Clinton Global Initiative, Chevron lost out on a further government accolade as Clinton was winding up her time as head of state.

In its overall political donations, Chevron historically skews heavily toward the GOP, while another huge U.S. corporation, chipmaker Intel Corp., skews toward the Democrats. Like Chevron, Intel also supported the U.S.A. Pavilion, and poured millions of dollars into other State Department projects, in Vietnam and other parts of the globe. In addition, Intel had given some $300 million in previous years to online training programs in 40 countries supported by the Clinton Global Initiative.

In the competition for the 2012 Secretary's Award for Corporate Excellence, Chevron was selected as a finalist by Under Secretary of State Robert Hormats. But in the end, the chipmaker edged out the oil driller, and Intel won the coveted award.

As it happens, Intel had also been hit with a huge foreign judgment, on allegations of maintaining a monopoly. The European Commission levied $1 billion fine against Intel in 2009, and the EU General Court upheld the penalty last year.

Google faces similar allegations today, but the judgment against Intel remains the largest award ever in such a case. There has been no move to challenge the award through the U.S. courts.

Both Chevron and Intel are represented in the United States by the Los Angeles-based firm of Gibson, Dunn & Crutcher.

It remains uncertain whether Kaplan's ruling against the villagers will hold up. At a Second Circuit appellate hearing in April, Judge Richard Wesley remarked: "We cannot find any case where there's been a collateral attack on a foreign judgment."

On the other hand, Judge Barrington Parker made multiple comments suggesting he found Kaplan's opinion persuasive.

During the oral argument, Wesley referred to an 1882 decision in England where the Queen's Bench, the court that handles petitions for equitable or nonmonetary relief, overturned a Russian judgment against an English bank. The English court ordered a retrial of the dispute in England.

Addressing Chevron's lawyer, Ted Olson with Gibson Dunn, Judge Wesley alluded to the international road the Lago Agrio case has traveled, starting as a federal class action in the Southern District of New York, moving on Chevron's motion to Ecuador, and returning to the Southern District for an attack on the Ecuadorean judgment.

Wesley said: "If we had the powers, as the Queen's Bench did, we could order you to go to trial – a trial that you once resisted mightily in the Southern District – and retry this case."